Business Context and Reporting Period
Company: ZIMMER BIOMET HOLDINGS, INC.
Filing Type: Form 8-K (Current Report)
Date of Report: April 6, 2018
Context: The filing serves as a Regulation FD disclosure to provide supplemental financial information adjusted for the adoption of two new accounting standards effective January 1, 2018: ASU 2014-09 (Revenue from Contracts with Customers) and ASU 2017-07 (Improving the Presentation of Net Periodic Pension Cost).
Key Financial Metrics
This filing does not contain specific numerical values for revenue, profit, cash flow, margins, debt, or liquidity. Instead, it describes the qualitative impact of accounting changes on financial statement line items:
- Net Sales: Expected to decrease due to the reclassification of certain immaterial costs from selling, general, and administrative expenses to net sales under ASU 2014-09.
- Operating Profit: No impact from the adoption of ASU 2014-09.
- Net Income: No change to reported or adjusted net income; the standards only alter the presentation of costs within financial statement line items.
- Pension Costs: Under ASU 2017-07, the service cost component of pensions is now reported with other compensation costs, while other components are reported in Other income (expense).
Material Changes Versus Prior Period
The filing details a retrospective restatement of prior reporting periods (2016 and 2017) to align with new accounting standards:
- Revenue Recognition (ASU 2014-09): The Company elected the retrospective method, resulting in restated prior periods. The principal impact is a reduction in reported net sales with a corresponding reclassification of costs, leaving operating profit unchanged.
- Pension Presentation (ASU 2017-07): Prior period operating and non-operating expenses are impacted by offsetting amounts to reflect the new presentation of service costs versus other net benefit costs.
Guidance, Outlook, and Risks
Management Commentary: The Company states that the application of these new standards changes only the financial statement line items in which certain costs are presented. There is no change to the underlying economic performance or net income.
Future Reporting: Beginning with the quarter ended March 31, 2018, all financial information will reflect the adoption of these standards. Additional disclosures regarding the impact will be included in the Form 10-Q for the quarter ended March 31, 2018.
Legal Disclaimer: The supplemental financial information (Exhibit 99.1) is furnished for informational purposes only and is not deemed "filed" under Section 18 of the Exchange Act.
Investor Verification Checklist
- Verify the specific dollar amounts of the net sales reduction and cost reclassifications in Exhibit 99.1 (Supplemental Financial Information).
- Review the upcoming Form 10-Q for the quarter ended March 31, 2018, for detailed quantitative impacts of the new standards.
- Confirm that operating profit and net income figures remain consistent with previously reported figures despite the line item reclassifications.
- Check the Company's investor relations website for the full adjusted financial tables referenced in this filing.